Questions and Answers of Economics Of The Public Sector

5. What could be the biggest challenges for the McDonald’s in your home country in the next 5 years? Discuss from both the micro and macro perspectives.
4. What variables other than price appear to have the biggest impact on the demand for McDonald’s products? How much influence does the company have over these variables?
3. What role did the policies of various governments play in influencing the international expansion strategies of McDonald’s?
2. Compare the McDonald’s in your home country with the US McDonald’s. Discuss whether they have the same or different strategies.
1. Discuss how the examples in this chapter illustrate the major theme of this text: Changes in the macro environment affect individual firms and industries through the microeconomic factors of
4. Based on the discussion in this chapter, how did McDonald’s development of its mini-restaurants improve its overall profitability?
3. Regarding the discussion of when McDonald’s introduced its Dollar Menu strategy in the fall of 2002, why was the company assuming or hoping that the demand for its products was elastic? Did this
2. Give examples of oligopolistic behavior among the rivals in the fast-food industry.
1. How will the discussion in this chapter be different if the example of McDonald’s is replaced by a perfectly competitive firm?
5. Find examples in current news publications similar to those in this chapter of the strategic responses of individual businesses to changes in currency exchange rates. Are these firms adapting to
4. The exchange rate of Vietnamese dong had been fixed at 20,828 dong per US dollar since December 26, 2011. However, Vietnam’s central bank, the State Bank of Vietnam, devaluated its currency by 1
3. Based on the discussion in this chapter, update the controversy over the value of the Chinese yuan in foreign currency markets. Is China still using central bank foreign exchange policy to
2. Foreign direct investment (FDI) in India dropped by 3 percent in 2013, and the Indian rupee depreciated to a record low of 68.85 rupee per US dollar on August 28, 2013. How do these two changes
1. In current business publications or on the Bureau of Economic Analysis international accounts Web page (www.bea.doc.gov/bea/international), find the latest statistics on the balance of
6. In the foreign exchange market, explain which variables cause a movement along the demand for dollars curve and which variables cause the curve to shift. Repeat the exercise for the supply of
5. Using the simple model of Table 15.12, explain why there is a balance of payments equilibrium when export spending equals import spending.What is the more general condition for equilibrium in the
4. If the U.S. economy is operating near full employment and the exchange rate increases (the dollar appreciates), explain why the Federal Reserve will be less inclined to raise interest rates.
3. Suppose the government of Country A imposes a tariff on the goods and services imported from Country B. Draw two graphs to illustrate the changes in the values of Country A’s currency and
2. Evaluate whether the following statements are true or false, and explain your answer:a. A trade deficit occurs when the government spends more than it receives in tax revenue.b. In an open, mixed
1. Show the effect of dollar appreciation and depreciation with the euro on the price of U.S. exports and imports by updating Table 15.2, as shown in the updated table.
6. Draw graph(s) to illustrate how policy makers deal with the dilemma caused by stagflation.
5. In a closed (no foreign sector), mixed economy with stable prices, if we assume that consumption(C) and investment (I) spending do not depend on the interest rate (r), can we conclude thata. The
4. Evaluate whether each of the following statements is true or false, and explain your answer:a. The short-run aggregate supply (SAS) curve slopes upward because households spend more as their
3. A change in the real money supply can result either from a change in the nominal money supply through Federal Reserve policy (holding the price level constant) or from a change in the price
2. Explain how each of the following changes would shift the aggregate expenditure function (Chapter 12)and the aggregate demand curve (Chapter 14):a. An increase in personal taxesb. An increase in
1. Discuss the impact of an increase in price level on the real money supply, equilibrium interest rate, interest-related consumption, investment expenditure, aggregate expenditure, and real level of
5. Find the most recent summary of the survey of economic forecasters in the Wall Street Journal.What are the predictions for changes in real GDP and its major components, inflation, and
4. Using both the sources in this chapter and updated articles from the literature, discuss the debate over the rate of increase in productivity in the economy and the impact that productivity
3. The Dutch economy is recovering from recession slowly. It is projected that in 2015, not only will the domestic consumer and business confidence increase, but the economy recovery in Europe will
2. Having led in mobile adoption since the 1990s, South Korea is taking preemptive action to develop a 5G network. The government of South Korea is spending $1.5 billion on upgrading the network,
1. Describe how the following statements relate to the AD–AS model:a. The Fed has bought more than $2 trillion of Treasury and mortgage bonds to stimulate the economy.b. The above actions by the
5. Building on Figures 13.5 and 13.6, show how equilibrium in the money market would change:a. If money demand is less sensitive to the interest rate orb. If there is a greater responsiveness of
4. On the Federal Reserve Web site (www.federal reserve.gov), find the minutes of the most recent FOMC meeting. (Minutes of a given meeting are published after the next scheduled meeting, so they lag
3. In order to stabilize the money market and to meet the huge demand for cash during Chinese New Year, the People’s Bank of China, the Chinese central bank, pumped 255 billion yuan (42 billion US
2. To stop the inflation rate from decreasing further, the European Central Bank (ECB) is expected to start buying government bonds in the secondary market soon. Huw Worthington, European interest
1. In current business publications or on the Federal Reserve Web site (www.federalreserve.gov), find the press release from the most recent meeting of the FOMC. What is the targeted federal funds
6. Draw graphs and explain how each of the following cases changes the equilibrium interest rate in the money market.a. Purchase of government bonds by the central bank on the open market.b. Increase
5. Explain which of these interest rates the Federal Reserve sets:a. The discount rateb. The federal funds ratec. The prime rate
4. What are the three tools the Federal Reserve uses to change the money supply and interest rates in the economy? Which of these tools is most important and why?
3. If the reserve requirement (rr) is 0.2, what is the simple deposit multiplier? If, in addition, the currency deposit ratio (c) is 0.05 and the excess reserve ratio (e) is 0.15, what is the money
2. What is a fractional reserve banking system? What is its role in the monetary side of the economy?
1. Discuss the impact of each of the following changes on M1 and M2.a. $1,000 currency has been deposited to a checking account.b. $1,000 currency has been deposited to a savings account.c. $1,000
6. Compare and contrast current U.S. economic activity with that described in the opening case of this chapter.
5. What were the key provisions of the American Recovery and Reinvestment Act passed by Congress in February 2009? How has the impact of the Act been evaluated?
4. Due to a massive monetary stimulus, Japanese yen depreciated against the US dollar by about 25 percent in 2013. However, the sales tax in Japan has risen from 5 percent to 8 percent since April 1,
3. According to the findings of the GfK Consumer Climate study, the Consumer Confidence Index(CCI) for Germany was 8.3 points in February 2014, which hit the highest level in seven years.92a. Discuss
2. Redraw Figures 12.11a and 12.11b to illustrate the effects on the resulting equilibrium level of income from each of the following changes:a. A greater sensitivity of interest-related consumption
1. Use the aggregate expenditure model developed in this chapter to explain the following statements:a. Coming amid continued turmoil in the financial and credit markets, the report sent stocks
6. The following graph shows the aggregate expenditure functions of an economy.a. Suppose the economy is originally at the equilibrium level of income at $2000. What would be the change in
5. Given the following variables in the open economy aggregate expenditure model, autonomous consumption (C0) = 200, autonomous investment(I0) = 200, government spending (G0) = 100, export spending
4. Evaluate the following statements as to whether they are true or false:a. The multiplier means that changes in wealth have a larger effect on consumption spending than changes in consumer
3. Explain how the aggregate expenditure function shifts in response to changes in each of the following variables:a. The real interest rate increases.b. Consumer confidence decreases.c. Higher taxes
2. Describe the effect of the currency exchange rate on export and import spending.
1. Determine whether each of the following changes has an impact on autonomous consumption expenditures or on induced consumption expenditures.Does it cause a movement along or a shift of a linear
8. Drawing on current business publications, find an article in which either fiscal or monetary policy makers were describing their goals of maintaining stable prices, full employment, and adequate
7. From the National Bureau of Economic Research Web site (www.nber.org), find the official beginning and ending dates of the recessions that have occurred since 1965. Which recession was the longest
6. As the unemployment rate in Greece rose to 28 percent, 61.4 percent of those under the age of 25 were jobless in November 2013. However, there are some signs of recovery in retail sales,
5. From the Bureau of Labor Statistics Web page(www.bls.gov/cpi), find the answers to the following questions:a. How is the CPI used?b. How is the CPI market basket determined?c. What goods and
4. Find an article in a current business publication that discusses revisions in the GDP data. How significant were these revisions for your example?
3. From the Bureau of Economic Analysis Web page(www.bea.gov), construct a table showing the annual percentage change in real GDP, gross private domestic investment (I), nonresidential fixed
2. Table 11.6 (below) shows the nominal GDP of Denmark from 2005 to 2012.40a. Calculate the annual growth rate of Denmark’s nominal GDP from 2006 to 2012.b. Supposing both population and the price
1. Drawing on current business publications and using the opening case of the chapter as a guide, discuss how the slow economic recovery in 2011 and 2012 has affected the current strategies of firms
7. Adding to Table 11.1, if in 2007 real GDP was$13,206.4 billion and nominal GDP was $14,028.7 billion, calculate the percentage change from 2006 to 2007 in nominal GDP, real GDP, and the price
6. Suppose an economy produces only two goods, cups of coffee and gallons of milk, as shown in Table 11.E1:a. Calculate the expenditure on each good and the nominal and real GDP for 2010, the base
5. Explain why GDP could be different from national income.
4. Is it true that the value of U.S. imports is added to exports when calculating U.S. GDP because imports reflect spending by Americans? Explain.
3. Explain whether transfer payments, such as Social Security and unemployment compensation, are counted as government spending in calculating GDP.
2. Evaluate whether all of the following are considered to be investment (I) in calculating GDP.a. The purchase of a new automobile for private, nonbusiness useb. The purchase of a new housec. The
1. Discuss the impact of each of the following transactions on the calculation of Japan’s GDP.a. A Japanese household bought a new computer produced in the current year.b. A Japanese household
6. Smartone is one of the largest mobile network carriers in Hong Kong. In order to suit different needs, it offers a great range of price plans. For instance, if a customer wants to subscribe to a
5. Publishers have traditionally sold textbooks at different prices in different areas of the world. For example, a textbook that sells for $70 in the United States might sell for $5 in India.67
4. 2014 FIFA World Cup was held in Brazil from 12 June to 13 July. The following table shows the prices of individual match tickets for general international public in category 1.MATCH Price Opening
3. The following discussion pertains to the pricing policies of Linear Technology Corp.:65 The semiconductor industry Linear Technology Corp. has maintained strong profitability by operating at the
2. The following discussion focuses on the change in production and selling strategies of Timken Co., the Canton, Ohio, firm that is a major producer of bearings:64 To counter the low prices of
1. In the current business media, find examples of firms that changed from pricing based on cost to strategies that also incorporated information on the price elasticity of demand.
8. A cable company offers two basic packages:sports and kids, and a combined package. There are three different types of users: parents, sports fans, and generalists. The following table shows the
7. A monopolist sells in two geographically divided markets, the East and the West. Marginal cost is constant at $50 in both markets. Demand and marginal revenue in each market are as follows:QE =
6. An airline estimates that the price elasticity of demand for business travelers (who travel on weekdays) is –2, while the price elasticity of demand for vacation travelers (who travel on
5. Suppose that individual demand for a product is given by QD = 1000 − 5P. Marginal revenue is MR =200 − 0.4Q, and marginal cost is constant at $20.There are no fixed costs.a. The firm is
4. The following graph shows a firm’s demand curve, marginal revenue curve, marginal cost curve, and average total cost curve.a. If the firm charges a single price, what will be the firm’s output
3. Suppose a firm has a constant marginal cost of$10. The current price of the product is $25, and at that price, it is estimated that the price elasticity of demand is −3.0.a. Is the firm charging
2. Given each of the following price elasticities, calculate the optimal markup.a. −15b. −8c. −3
1. With the equation that shows the relationship between marginal revenue and price elasticity of demand, explain why a perfectly competitive firm always has its marginal revenue equal to the market
6. According to an investigation by the Competition Commission of Singapore (CCS), 11 air freight forwarding companies and their Singapore subsidiaries and affiliates were involved in a cartel. They
5. The following describes the relationship between two major shipping companies hauling liquid chemicals:44 Documents indicated that two shipping companies, Stolt-Nielsen SA and Odfjell ASA,
4. The following describes the competition between Google and Amazon for fast delivery of customer products.43 In 2011, Google, Inc. began to challenge Amazon’s e-commerce dominance by engaging in
3. The following describes the ice cream industry in summer 2003:42 Given the Federal Trade Commission’s approval of Nestle’s acquisition of Dreyer’s Grand Ice Cream Inc., two multinationals,
2. The following paragraphs provide a description of the strategy used by Morrisons to raise its sales41:Morrisons, one of the “big four” supermarkets in the UK, has been losing market share to
1. In current business publications, find examples of the continued oligopolistic behavior among the airlines similar to what we discussed in this chapter.
7. The following graphs show a monopolist and a potential entrant.a. Label the monopolist’s profit-maximizing price and quantity.b. Identify a limit price that the monopolist could set to prevent
6. Consider a market with a monopolist and a firm that is considering entry. The new firm knows that if the monopolist “fights” (i.e., sets a low price after the entrant comes in), the new firm
5. A monopolist has a constant marginal and average cost of $10 and faces a demand curve of QD = 1000 – 10P. Marginal revenue is given by MR = 100 – 1/5Q.a. Calculate the monopolist’s
4. Some games of strategy are cooperative. One example is deciding which side of the road to drive on. It doesn’t matter which side it is, as long as everyone chooses the same side. Otherwise,
3. Suppose Marcus and Sophia are playing tennis and it is Marcus’s turn to hit the ball and Sophia’s to receive it. If Sophia can receive the ball, she will get 1 point and Marcus will get 0.
2. The following matrix shows strategies and payoffs for two firms that must decide how to price.a. Does either firm have a dominant strategy, and if so, what is it?b. What is the Nash equilibrium of
1. The following graph shows a firm with a kinked demand curve.a. What assumption lies behind the shape of this demand curve?b. Identify the firm’s profit-maximizing output and price.c. Use the
5. Indicate whether each of the following statements describe a perfectly competitive firm, a monopolistically competitive firm, and/or a monopolist.a. A firm is producing at the output where MR
4. The following discussion describes recent changes in the strategy of Parker Pen Co.80 Although consumer interest in fine writing pens in the United States may seem equivalent to consumer response
3. The following discussion describes a patent dispute in the pharmaceutical industry:79 In 2008, state and federal authorities were examining whether Abbott Laboratories violated antitrust laws in
2. The following discussion describes the sales growth and strategies of Samsonite.78 In 2013, Samsonite, a luggage producer, acquired two of its competitors, Hartmann and High Sierra.Led by the

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